In Manufacturing, Avoiding the Million Dollar Mistake

Industry analyst Dan Woods recently published a white paper called “The Million Dollar Misperception” that examines some of the mistakes mid-size manufacturing companies make in their efforts to scale, grow and expand.

A Forbes columnist who heads CITO Research, Woods delivers valuable analysis and insights into what he calls the “waves of change” that are rocking manufacturing. (Download your copy of the white paper here). My goal is to highlight a few key points of the paper, namely the “transfer of responsibilities” that occurs when a manufacturer shifts to a SaaS model, depicted in the illustration below.

For mid-sized manufacturers, this transfer of responsibilities calls to mind the idea of “core and context” put forth by best-selling business author Geoffrey Moore several years ago. As discussed in a SupplyChainDigest article, the business “core” is any aspect of a company’s operation that creates competitive differentiation that influences sales. Everything else is “context.”

Ask yourself a few important questions:

Is IT management, administration and development a core competence of your manufacturing company?

Do you add value to your customers and partners through data center administration?

How many developers, software quality assurance and software product managers do you employ?

Who else helps you with software code development or customization?

If the answers are: no, no, zero and no one, I would suggest that you are a manufacturing company—not a software shop—and that IT management is not your “core” differentiating value-add.

In his white paper, Dan Woods takes a hard look at the unproductive, non-revenue contributing tasks that can consume valuable time and resources of a manufacturer. With a transfer of responsibilities to a SaaS/cloud vendor, manufacturing companies can better focus on their core—building products, servicing customers and partners, and growing the business.